1/03/2007 @ 4:34PM

India's Sensex Breaches 14,000

The Indian stock market ended Wednesday on a high note, closing above the 14,000 mark for the first time on buying in pharmaceutical, technology and select auto stocks.

On the second day of trading in 2007, the Bombay Stock Exchanges benchmark Sensex added 0.5%, to end the day at 14,015. The National Stock Exchanges Nifty also ended the day up, gaining 0.4%, at 4,024.05. Mid-cap stocks were among the key players in the rally.

A big gainer among automobile stocks was
Bajaj Auto
, which rose 4% to end the day at 2,842.6 rupees ($64.20). Among technology sisues, Indias leading services player,
Tata Consultancy Services
added 2.6%, to close at 1,281.3 rupees ($28.90),
Infosys
was up 2% at 2,312.6 rupees ($52.30).
Wipro
and
Satyam Computer
both gained 1.5% to close at 620.3 rupees ($14.00) and 515.2 rupees ($11.60), respectively.

Among other Asian markets, the Hang Seng index closed at a record 20,413, up 0.5%. Singapore’s Straits Times index crossed 3,000 for the first time, adding 1.7%, to 3,038. The Philippines stock market gained 1.5%, at 3,0270–the highest level in 10 years–on a strong economic outlook. But Thailands SET Index lost 3% on its first day of trading in the year, closing at 659.25. The market was hit by concerns over economic stability and the tourism industry after New Years Eve bombings in the capital killed three and wounded dozens.

The 30-issue Sensex touched 14,000 in December but then dropped below 13,000 in a couple of days after investors reacted to the central bank, the Reserve Bank of India, raising the cash reserve ratio, the portion of a banks deposits that must be held with the central bank. Investor confidence fell further on industrial output figures for Octobergrowth slowed to 6.2%, the lowest number this fiscal year.

But analysts say a correction was in cards, and many are now bullish on the markets in 2007. Both the long-term economic and equity market outlook for India remains favorable, said Sandeep Kothari, a fund manager at Fidelity Equity Fund and Fidelity Tax Advantage Fund.

Kothari is confident that economic growth will remain on track at around 8%, even if interest rates are raised slightly, he said.

But there could be cause for concern on valuations. Dipak Acharya, a fund manager at the Bank of Baroda Mutual Fund, said though stocks seemed fairly valued now, a lot was riding on Indian companies upcoming earnings. With valuations at the higher-end of the trading range, there is potential risk for some near-term market volatility.

But as the markets enter 2007, there is confidence that domestic investors will continue to pour funds into stocks ranging across sectors. Acharya says capital goods, infrastructure and cement stocks are likely to be among the outperformers. With the Indian governments push to make the country a manufacturing hub, automobile stocks will gain ground over the next few months.